How to Build a Global M&A Machine with Sindre Talleraas Holen Part 1

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Back to the episode.

I'm Kisam Patel and you're listening to M and A Science where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies and what actually happened during M and A deals.

Foreign.

Scientists welcome to the M and A Science Podcast where we learn from the best in M and A to uncover proven techniques for enterprise value creation. If you're interested in learning more about how to optimize your M and A practice or want to get involved with our community of forward thinking M and a practitioners, visit ma science.com subscribe to our free weekly newsletter. You want to keep up with us on the go, head over to LinkedIn and follow M and A Science. I'm your host, Kisan Patel, Founder and CEO at Deal Room and Chief scientist at M and A Science. Joining me today is Sindra Talarhas Holin, head of M and A at Visma. Visma is a leading provider of cloud based business software specializing in accounting, payroll invoicing, tax and HR solutions. Bisma has over 16,000 employees serving over 2 million customers across Europe and Latin America. Today we're going to talk about how to build a global M and A machine with local expertise. Syndra, how are you doing today?

Good, Doing good.

Thank you for hosting us live here in Oslo, Norway at Visma's headquarters.

Yeah, great having you. And welcome.

Great excuse to get out here to Northern Europe and hit the slopes as well.

Oh yeah, you came with the snow, right? Over the last few hours, half a meter of snow have come here.

I had a lot of fun yesterday. That's not the most exciting part. This conversation's going to be far more than that. Even though it was an amazing day of snow yesterday, we should actually do a little background on Bisma first. Before I get to your background. It's just been really interesting. I read up on it and the company has a very extensive history with M and A from even how it was formed. Can we talk a little bit about that?

Visma was formed in 96 when three ERP systems were actually merged. Our former CEO, he then joined Visma back then in 97. Rest of course is history. Back then we were listed on the Oslo Stock Exchange and then just around 2000, just before the dot com bubble bursted, Visma were able to sell their shipping division, there was a marine division to a telco company and they sold it for like 100 million euros, which at that time was absurd multiples. But nevertheless what happened was that Eustein Mohan, the CEO back then, he actually got a lot of criticism in the media because he didn't take shares, he only took cash. But then of course the dot com bubble bursted a couple of months later and Visma, I mean back then it was a very small company, it was a small ERP business. But then Visma actually had 100 million euros of cash and all valuations dropped significantly 90 plus percent. And then the M and A spree started. So that's how sort of the modern Visma started. Then I started to together with the cfo, started to do M and A quite a bit buying Competitors and adjacent products around ERP. Then HD Capital delisted us from the stock exchange in 2006 and I joined 2009 as a management trainee as part of the graduate program. My history starts there. From there, very early on we deliberately took a decision to move towards cloud. That was pretty bold back in 2010. So already back then starting to think about cloud. Right now it's a complete no brainer. But back then was not early.

Yeah, it was until even 13. But then enterprise took a lot much longer to adopt.

Indeed. So if you look at it from that historical lens it was a pretty bold move. It's going from on prem to cloud. It's also painful. But when you come on the other side then it's a much nicer place to be. Now we are 90 plus percent recurring cloud and then it's real cloud, not hosting, not ASP and it's multi tenant SaaS.

How many deals has the company done since inception?

Somewhere along the lines you sort of lose track I guess but sort of. My accounting is 350 plus, probably 400.

And then you personally how many deals have you been involved with since you started?

Probably, probably over 300.

So a lot of it. This activity has been sort of in this recent decade.

Yeah even though they were quite acquisitive also pre my time. But then you have to recall it was the CEO and CFO who did the deals themselves. It was more a left hand activity. But now when I joined we set up a. We were actually a two man band running around in the Nordics buying small software businesses for a decade. Then my boss left for HG and I took over five, six years ago. And for a short stinter period there I was a one man band. But then I started to hire and now built the current M and A team.

What's your personal background that qualifies you to be heading up all this M and A activity?

That's a great question. I came straight out of university so company man started as a management trainee. Actually three out of the top management team is actually coming from that graduate trainee program. So that's pretty unique. And then very quickly it turned into M and A. I've been doing M and A almost for two decades now.

Is this like of the top Ivy League schools that print out people like you or is it. No, is it more of just give somebody the ambition chance and see what they can do.

Visma is a pretty unique place giving people chance. And then when you swim at 10 meters then they throw you out 50 meters and throw you out at 100 meters and so on.

See how far you can make it.

Yeah.

So you came right out pretty early. What was the experience like in the formation of the M and A team? Because you said prior to you joining it was mainly the CFO and another person in the company that was driving the activity. But. But then they set up an M and A function.

Yeah, this is down memory lane. I was actually quite bold back then. This 2009, straight out of university, I wrote the CEO an email instead of asking because we were actually planning an IPO back then 2010 and then KKR preempted that, but I actually wrote him an email, sort of, hey, I've just started invite. Do you need help with the ipo? Pretty bold, maybe even unheard of. But yeah, I did that and he replied. And the plan was actually to hire a IR head of IR and M&A. And then when you have one big investor in KKR then you don't need IR anymore, but you need M&A. So the IR function just shut off. And then we had this M and A team, me and my from Boston.

So this really originated of you sending a cold email to the CEO. He doesn't know, you know, you. You just reached out and said, hey, the company's going ipo. Can I help out with it?

It's pretty much it now.

The KKR story is actually really interesting because I read about it, they came in, I didn't know it was tied to the ipo. I know they bought a majority stake of the company. HC Capital is still involved.

Yeah.

And then later on I guess he ended up taking the majority back.

Exactly.

So the PR should regret.

But yes, that's the story.

That's the story. How long were the owners for?

It's a typical PE cycle. So it's that 3 to 4 year cycle.

Enough to show good IRR then move on to the next thing.

Exactly.

So the cold email that led to, hey, let's talk a little bit about this. We're changing directions but we still need M and A and then want to start doing some M and A.

Exactly. Then my first job was a CEO. Then back then 2009 that was actually to hire my own boss. We were pretty efficient two man band running around mainly in the Nordics, a little bit in the Benelux, a little bit in Central and Eastern Europe. But we were able to do 10, 15 deals per year. So for a two man band that was not bad.

I want to hear like you've done hundreds of deals what are the top three big patterns, themes, must haves, you know, that you learned over time to.

Set the stage a bit. The type of businesses that we acquire, that's typically well run companies that has a proven product, happy customers, happy employees, very solid management. That's the run of the mill. M and A that we do. So to have that background, we essentially buy good companies, don't buy turnaround companies or turnaround situations. High level, I would say important aspect is actually to stick to what you know. For us it's always to have that North Star, to have that alignment with the equity story. I do believe that's super important. So to always keep that in mind. Will this enhance the equity story? How does this fit the equity story of Visma? I do believe that's very important. So that's maybe one element. And speaking about alignment, I would actually argue having that internal alignment is as important, if not even more important. So with the old internal stakeholders we always say that M and A we cannot be a champion for a deal and we would have done a lot more. We always need to have that operational champion. So to already pre loi you sort of need to have that internal alignment. In that context of okay, Is this a 100% acquisition? Is it an earn out? Is it a one year earnout? Is it a three year earnout? Is it a five year earnout? What type of metrics do we measure? Is it an Ebitda game, Is it ARR? Sort of all these type of discussions that you need to align internally. I do believe that is very critical. Maybe the last thing this is more maybe relevant for Visma as a firm. But we like to buy proven companies. We have customers, we're not the VC player. VCs, they have a different agenda. One out of 10 hits the jackpot and then you're all happy. But we are not a VC play. We like to buy proven companies with proven customer basis and proven products.

Ideally safe bets.

Ideally safe bets. Every now and then we do a bit more hair bets, but that's not a run of the mill.

So stick to what you know, align with the story of the business, the Visma story. Having an internal operational championship that's really going to deliver on the results.

Yeah.

And then buying proven companies, ones that aren't just big risk bets. But you're sort of building a model that gets your returns.

Good summary.

I'm curious about the culture of doing acquisitions. I mean, you know, you have Europe and then there's you later got into Latin America. Are people just receptive because it sounds like there's so many deals you've done that you call people and they're like, yeah, sure, we'll talk to you, we'll take an offer. Sounds so easy. But just walking around the office, seeing all the buzz around here, I'm like, this is pretty interesting. They make an M and A look easy. I've looked at your website. You've done deals and so many different countries. Let's take that alone. How many different countries have you done deals in?

It must be 30 plus.

Yeah. Okay. Is there an element around that is like M and A received culturally different between countries as you approach targets?

Absolutely. No, I think it's very, very different. Even only in Scandinavia, Norway, Sweden, Denmark and Nordics, Finland. I mean, it's very, very different. People might from the U.S. perceive that. Yeah. Oh, Nordics. Same, same. Very different. So even here it's very different. The more south in Europe you get, the more emotional it gets as well. And then you throw in Latin America in the mix and it becomes very different. I always have a saying, M and A is local. That's just super important to know. And 3D is always way better than 2D. So you need to meet people locally, speak their local language, see them in the eyes and really be that local partner. I do have tremendous faith in that. That's also why the M and A team, right now, you're almost 20 people or M and A professionals, but they are based all over. Nordics, Benelux, we have Germany, France, Spain, Italy, Central, Eastern Europe, uk, Back to M and A. Being local, it's so important.

And that's what they're doing is they're adapting culturally, locally, and catering to that M and A conversation based around that.

Yeah. Language is one thing, to be honest, it's almost the easy part. But it's about the way you're negotiating in a country. It's very different. Brazil, I've just learned that after the loi, that's when you really start to negotiate.

After the loi.

After the loi, after you think you have agreed on everything, then that's when the negotiation starts. So it's just very different country to country. So to have that local domain knowledge, to have that local knowledge around the whole cultural aspect, I do believe it's super important to be local.

Yeah. That's so interesting that you had such a diverse experience around it. What other things do you see? I'm curious, like what countries are the easiest to work with? What are the hardest ones to work with?

All countries, they have their peculiarities and their specialties.

And then it goes, I'm from the US and it's like, you're going to have some really good sellers, you're going to some really bad sellers within our country. And I take it every country is similar too. You're going to have some good apples, bad apples, absolutely.

And you have that in Norway and you have that in Spain and you have that in Argentina. That's just a way of.

There's some fun cultural differences to sort of accommodate it with.

Take trust as an example. That's here in the Nordics. Like Norway, we do actually trust each other. There is a lot of trust already on the first date, essentially. And it's not uncommon that you even start talking. I mean, we are commercial people and opportunistic. Can even talk about pricing on the first date, first meeting, then it's not uncommon. It doesn't happen always, but not uncommon. But if you go the further south you go. And Latin America as well. Trust, that's super important. Particularly everyone knows about visma in Norway. Nordics, not that well known in Latin America. Yet to have that trust that's not built over zoom or video. That's one thing. And the other thing, of course is it takes time. So to talk about the family and talk about business and get to know each other, these things are very important.

Okay, so your advice to me, where I'm working on first international deal, let's just say it's in Germany. I should go meet the people. What else can you tell me? What else should I be doing? First deal, I'm looking at it. It's international by nature in Germany. Yeah.

You should look forward to the fact when you are signing the deal and they are reading it up word by word at the notary, the whole thing from A to set, it usually takes between 10 and 15 hours.

That's the highlights. Do I have to sit there through that?

You have to sit there. I hear they do drink champagne while reading. But yeah, it's very, very German. But yeah, meeting each other face to face, I do think that is important. Whether it's in Germany, whether it's in France or Norway. To be honest, that is important as part of the M and A game.

Any other nuance, things I should think about culture. I bring them like a nice cool M and a science pin like I brought you.

Maybe they get as impressed as I were. But it's talking more from the Visma perspective. Yes, there are all these cultural differences, but I would also say software entrepreneurs and tech Entrepreneurs, they are tech entrepreneurs. That's a universal thing. It's almost a universal language to meet tech entrepreneurs and to speak to other tech entrepreneurs that they do tend to bond across borders. So I wouldn't underestimate that point either, to be honest.

Industry culture. Let's talk about execution. One of the big things I've been, I don't wanna use the word ranting, but advocating is around buyer led M and A. And it's just what I've noticed. Companies and the way they evolve their M and A function really starts from seller led. And then as they do and deals, it becomes very buyer led. All in the pursuit of better M and A outcomes. You've obviously seen tons of deals. What's your view on a buyer led approach to M and A?

I guess you're right. When you start doing M and A by default, it's a bit opportunistic in the beginning, then it become quite seller led in the context of what's for sale and those type of things. But for us, we like to drive the M and A agenda. We have a pretty clear agenda in terms of what type of targets we're looking for, what type of geographies, what type of products, what type of growth rates, sales, KPIs, cash flow, margins, et cetera, et cetera. We have that and I do believe it's critical to own that ourselves instead of just being completely opportunistic and run after whatever pops by our desk. I get probably 10 inbound emails every single day by people from brokers, small broker houses all over the world. Shooting an email on a random verticalized ERP or whatever it is in. Yeah, all over the world. So you can't jump after all of them.

Where does that sit in terms of you get a bunch of inbound versus proactively pursuing opportunities. Do you sort of prioritize one over the other? How does that play out?

Yeah, when you've been doing this for almost two decades, you sort of have a very good gut feel in terms of is this good or not, is this worth our time or not? I have a pretty good gut feel on that.

So you do a really quick assessment of like, all right, are we going to click down in this or not? Otherwise, when you're proactive, you know your scope pretty well.

Exactly. I probably spend 10 seconds deciding whether or not this is something to pursue. Of course, us reaching out to targets, that's name of the game. Those are also the best deeds.

What about actual execution? Yeah, when you reach out to the targets, that Makes a lot of sense because you probably even know the business pretty well ahead of time.

Yes and no. Even in the Nordics, right? I've been doing M and A here for two decades in Norway. You would argue I probably know the B2B software market here pretty well. But even here, five and a half million people, 5, 600,000 businesses, every now and then it pops up random new companies that I've never heard of. That's 10 million ARR growing super fast. I don't think it's possible to get sort of a complete oversight. What's unique with Visma is that we, yes, we have around 20m and a professionals only working with M and A to Z. But I would actually argue our M and a department, that's 15 or 16,000 employees, that's the front line and they are the ones. I do believe this is a pretty unique culture. But the whole culture of Visma is about growth. And these guys, they know who are they losing to, who are they winning against, who are they having most API calls from what would make a perfect add on to an accounting system, all these type of things. They know that more than us in the M and A department sitting and googling or using AI. So I do actually believe leads coming from line management also are the best leads.

How do you get them together? Are you running around trying to have as many conversations to see what ideas they have or are they more built down the process where they're bringing stuff to you and they start negotiating, sending out Lois and then tell you about it?

Oh no, they should not go out any loi without my signature on it. That is important. So I'm aware of all.

Lois, how do you build a funnel out of this? I agree. I see how this could make a lot of sense. The people that are in the market and see all these opportunities.

Also, the fact is it's very clear guidelines across this organization that line management, they don't negotiate pricing. They can talk to companies, they can talk to competitors, they can talk to adjacent companies, et cetera. But they don't do M and A. They are a friendly, warm intro.

They know enough to know that hey, if you come across an opportunity, we have a process for that.

Yes. And then they tag us into it.

How do you address that? Is that something you just hop on a company wide call periodically and put out there or what's your approach to getting that system set up?

To be honest, I think it's fairly easy. People know when they should not start talking about M and A. Some MDs are for instance, in Visma, they are more proactive than others. Like anything in the world, right? Some like it, some doesn't. But at the end of the day they also know that pricing, structuring, these type of things, then there is actually a world class M and A department that we should pull into this.

So the leadership team is really what's aligned and they have a good sense of that because they just know the workings of deals they've seen done before and just how the companies culturally thinks about M and A.

Exactly. And the reality is once we actually start talking about M and A, we're always actually involved. That's just the way it is.

What about actual execution of deals? When you think about being buyer led, is there things you do there to drive that process, the seller process? You got a bank there and they are there and they're trying to get the deal done as fast as possible. But like I said, if your goal and your success track record is more about have the best outcomes, what are the things that you do to ensure.

That we have our standard procedures? I think that's also a good thing because even though we use a lot of operational people in the due diligence streams that we're doing, we have an in house team on ftd, on legal, on tech, et cetera. Right. So we can do a whole full blown M and A process in house. Quite a few of them are very familiar with sort of the M and A process, but there will always be people that are not. But we really try to have a streamlined process A to Z. This is how we do things. It's a Slack channel. This is how we work with that, this is how we communicate with each other. And to really be transparent in that group, that is important. We have our playbook. The M and A playbook in Vismite is constantly developing. We have people from competitors, we have people from pe, we have people from investment banks, we have people from other buy and build platforms. We all take that and always tweak it to have best practices all across.

There's a lot of different variables and nuances that you can continuously tweak to all in the pursuit of better outcomes on the deal.

Absolutely. As you said, right. Bankers, they tend to try to do a deal as fast as possible to get to a closing. We've done a deal in a week from reaching an agreement Friday afternoon and then Friday next week we've actually done the deal. Last year we did a deal here in Norway. Case management system called Akos probably met them first. Time in 2011, it's 13 years. So there are long dialogues as well. Back to trust and relationship building and these type of things.

Yeah, that's a good point. If you're proactive about it, you have to build the trust first and then those timelines. It's all for what's best for the deal.

Exactly.

Unless there's a bank process, then it's all about getting the deal done as fast as possible. There's no right answer on that. It's. I've noticed that deal by deal doesn't make sense to actually slow the deal down and really think through how the company's going to integrate. Have you found that out?

That's why both of us like M and A, each deal lives its own life. But I would say absolutely, if there are things, if there are regulatory things coming in, if there is performance that you're questioning, whatever it is, then use the time. If you're able to cause makes a.

Lot of sense in terms of how the execution, you drive it from the buy side get the best results. Keep optimizing over time. Going back when you talked about sourcing, because I know you mentioned the best is getting folks in your company proactively identify opportunities. Do you see any of that change across geographies? Is it sort of like consistent across the whole company or is it, hey, certain geographies actually have a ticket. A different approach to source deals.

Are there differences? Yes. Are they based on a specific geography more than the specific individuals? Probably no.

Okay.

I think it's more individual driven. If you have a local managing director in France being super pushy on doing M and A, then you let him be that and we try to help him and be there, really get things done. But maybe it's more on an individual basis.

I was just curious about that. If, like, hey, is there anything that changes there? Negotiation was a good example of how that could vary culturally as well. Valuation, you got an interesting view because you've done a lot of deals in different countries. You see differences in how software businesses are valued.

Short answer is yes. Long answer, I'm not sure if we have time for it. Jokes aside, it's very different if you turn the clock, say 15 years back. Back in the Nordics when we were doing deals here, quite often we were the only girl at the dance. We were also setting pricing ourselves and we were able to do nice EBITDA multiples.

Where were they back then?

They were nice compared to what they are today. You can even do single digit. I would say mid.

Let's say single digit. We cut it in half and you go below the, the midline or above.

Yeah. And it's also case by case. That's the reality.

We could reminisce about good old days on the podcast. There's nothing wrong with that. It's just everybody's going to clench your teeth a little bit about you should.

Have bought more back then. That's the. But you have to also remember there were a lot of question marks back then around tech, around cloud savviness. Cloud wasn't actually that mature.

That's true. People didn't know. They didn't know. It's the direction things were going to go.

No. And it was also a bit of a. You knew something would happen around tech but there was always this sort of, I would call it almost an inherent discount that okay, what's going to happen? There were just a bit of a question mark in the market around that. But if you have a multi decade view on tech in general, we've already been through a painful transition and that's how it is now on the other end, 90 plus percent recurring SaaS, then that's of course a much nicer place to be.

What about like today when it comes to valuation? Teach me this stuff because I don't want to screw up and I don't want to overpay and at the same time I don't want to insult somebody. I don't want to offend you either and give like secret sauce. So if there's anything you want to answer, let me know. But tell you what I learned so far. One, the growth factor matters and I feel like there's almost a category. If you're under 10% year over year, you're bottom side and then maybe 10 to 40% is another category and then the 40 to 100% and then I don't know if you're above a hundred, you're probably not talking to me. I feel like there's little buckets there that do put you in a category and then you can throw a multiplier on that. I'm still a little confused about the software I think is unique too. Obviously we keep that as our theme because I never heard of this thing when I first got into the industry of multiplier revenue multiplier. Now it's like a de facto everybody only wants to talk about revenue multiplier. But there's still instances when you talk about EBITDA multiplier. If I'm still confused of like when would you talk about One over the other.

It boils a little bit down to M and A in general. M and A is not rocket science. I do believe we have the benefit of having done three 400 plus deals. So we have a library of deals and pricing that we sort of demo Is this market or is it not? Last year we bought a 10 million ARR business growing 100%. Do you think you're able to buy a company like that for? I mean they're burning money so you.

Don'T say the word ebitda.

So the EBITDA is not even there. But do you think you're able to buy that for mid single digit ARR multiples? You're not. So I do believe that we have a very good perception of what market is. It does vary as well during country by country. Some countries are more expensive than others just the way it is. See that across Europe. We see it in Latam. Overall the market is fairly educated. They do know quite a bit around. Okay, what can I expect here? As you said, if you're a single digit grower, that's one bucket. I wouldn't put a bucket on 10 to 40% growth. I'd probably put it 10 to 20%. That's one bucket and then 20 to 40 as the next bucket. Of course that helps the multiple on the sales as well.

What's the other bucket? 40 plus.

Yeah, 40 plus.

That's probably 40 plus gets me as much same as the 100.

No, a hundred is quite a bit more. 100 is always better than 40. But yes, that's probably where it is.

Can we roleplay this out? Let's take my business. 10 million arrows. Don't take. This is all like for education purposes here but let's say it's 1 million net income. 1 million net income. And then we're consistently doing 40% year over year. At least this last year we did. Yeah. Plus this year 40% this year we're going to get it 50, 60. Put a whole new management team in. Oh so things, I got a good story for you. Right, tell me an AR. Last year we closed out right around 45% year over year. And then this next year whole new management team like I'm beating. People always have the chart that goes up and to right. But I have a high level of confidence we'll hit 50, 60% and that's what I'm really pushing for. What would you value a business like that?

It's a good question.

SaaS Enterprise B2B 40K year ACV.

Yeah, yeah. There are probably a couple of other metrics I would prefer, but high level also TAM wise, you're very M and A focused, right?

Very M and A. Let's be upfront. Let's talk that through. We talk about tam. And I said, look, the current path we're going, we sell the corp. Bev, we'll sell the private equity. We're probably going to start tapering around. Let's say 40 million ARR. Yeah, like that's a given. So it's definitely a smaller thing. We'd have to find adjacencies. We'd probably want to recap the business, bring some capital in and do some acquisitions around those adjacencies.

Yeah.

Okay. Now if I was, let's say in the 0 to 10% category, you're shaking, you're shaking your head, you don't even.

Want to talk to me, then it's not necessarily a vispa play, right?

Okay, I'm getting an x, getting a zero. So you don't want to talk to me at zero to 10, I'm going to have to go to. Well, it's.

If it's nine and a half, it's much better than one and a half, to put it that way.

Okay, who's going to be my buyer? 0 to 10, there's probably going to be some.

You always have some. Right. And I think there is. If you look at this, there are so many sort of this permanent capital vehicles out there only focusing on B2B SaaS, software companies or not even SaaS that can be on premises. So many copycats of consolation even argue ourselves even though we're talking about, okay.

So I'll call consolation and I'll get a quote from that.

You'll get the quote from them. I'm pretty sure it's all relative. It does depend if you hit the right buyer that is able to value you in strategic premium on top. At the end of the day, pricing is what someone is willing to pay.

That's a fair acknowledgment how much the buyer is willing to pay at the end of the day. Which is unique to every single potential buyer. Exactly. We'll acknowledge that. The EBITDA thing, I didn't quite get the answer on it because you had a good point of like, hey, these like negative zero EBITDA businesses and then you got a higher growth rate, you still got a strong value. What are the circumstances when I actually would want to use EBITDA over gross revenue?

Typically when the growth rate is flattening out and when you sort of realize. Because at the end of the day, why are people applying ARR multiples for sales multiples? It's because you have an underlying belief that any given software business should be able to earn 30, 40 up to 50% margin. You don't have that belief then you shouldn't do that investment. So over time you need to have that belief that any software business should be able to scale. And that's the calculation you're doing on back of an envelope when coming to an ARR multiple.

Ideally it's like that 0, 10% bucket. But I got some confidence I can increase that margin and that's sort of going to be my value add. So I would pay an EBITDA on that.

Yeah, centrally.

That's what every other industry does. All the traditional businesses, basically. Software is unique that there are so many businesses that are a growth category.

Yeah, exactly. And it is. Right? Software is. Our former CEO, he said it. Software is eating the world in many ways. That's also a fact. And many investors have seen that. The tourists, VC tourists from 2020, 21 even maybe 22, they're gone. I mean there's just so much capital into software B2B.

How do you see that panning out? Because those valuations were insane. I had a friend of mine show me a 20x term sheet and I was like, take it today, I'll take it. If you don't, then those companies that raised at that valuation, is there a thing that you track them and say, hey, if this company, there's still opportunities there where it could be a down round or it could be just they're going to write it off their portfolio and you buy you for a song and a dance. Is there anything around that?

We've seen it all. We've seen companies that are still really pushy on that. Yeah, I sold in 21 at X million. Now we're worth even more. We see that. Maybe not rational, but still we see it. And then we also see companies that are doing a 50 plus percent bullet sale or discount from the 21 pricing or even more. We see it all and then every now and then we even can buy them from bankruptcy.

I was going to say, because if they don't do that then they just.

We've seen it all, believe me, in.

That type of context, any deals you like from those situations, like in terms of like, hey, I don't mind buying it out of bankruptcy or buying at a discount, you obviously don't want to pay the person that's got the Same metric anticipations as 21.

Exactly. We're opportunistic. Whether it's buying a tech, which is still a solid piece of tech, if that makes sense for us, we're all open for that.

Depends on your appetite for it. You get to pick and choose from the buffet, I guess.

Yeah.

The valuation part, you don't think it's like a big difference, country to country? I know, like software. I feel like there is some universal aspect that we just talked about. But is this going to change if our business was located in Norway versus Latin America or us?

It does depend what you're doing as well. I mean, Norway, if Your TAM is 500,000 businesses versus I don't know how many businesses it is in the US it's 30 million plus. Probably. If your time is 30 million versus 500,000, does that have an impact on pricing? Short answer is yes. Looking from a visma perspective, we like stuff that has a lot of local rules and regulations. Right. The more the merrier. Essentially. Tax counting, payroll invoicing, need to have stuff, but with a lot of rules, a lot of regulations and every, I mean, every year, typically you change something there. The more local rules and regulations that is, the better it is for us.

Why is that? Just so it's like a moat. You don't have to worry about a bunch of competitors popping up.

Well, they try. I would argue that it's very hard taking one accounting system from one country to another. Super difficult. You do see it, but in many ways, like you see it in Commonwealth, maybe that some have succeeded doing it, but still there are. First of all, it's the same language, but that's typically the least worry. It's around the habits, local habits and local rules around how you work with the system. So even here in the Nordics, no one has really succeeded in taking one accounting product to another country. It's very different.

Then I would predict you got low churn rate because of that as well.

We do, but at the same time, due to cloud, it's fierce competition out there. Fierce competition makes you and your own products better. I do think we nurture healthy competition, but at the same time, yeah, by default, if you're happy, you don't want to change your payroll system or your accounting system.

That's an interesting view on how you look at it in terms of the type of businesses, then valuation. The TAM part makes a lot of sense because that's a big thing. You got a big market to go after, a lot of growth opportunities. You value business that way. What about exit? Does that come in play of? When I look at a company in the U.S. i say okay, prices are up because it's of people trying to acquire the business. A lot of exit options. I'm not just talking to you, that's what I'm trying to sell you. And then does that still play? If you looked at a company in Italy, really hotbed M and a market over there, I'd sort of would assume that there's not that many people that would be interested in the same kind of SaaS business that was based in Italy.

You should be surprised. Every market they have their own investor environment as well. We see that whether that's private equity, family office trade, buyers like ourselves, you always have large internationals that would like to enter and then you have all these local boutiques as well. Yes, it's a different investor scene. I would argue it's always there. But then again, it can also boil a little bit down to pricing.

Does this calculator get adjusted at all, country by country for us?

Short answer is probably yes. It also has to do with the geopolitical risk. In any country we try to do business in healthy, stable, safe economies. That's what we like. But at the end of the day, you do adjust. You're also adjusting to the market. So the market values different businesses differently in different countries.

Do you have a playbook or approach when you buy a business in a brand new market that you haven't been to yet?

We do.

I buy a copy of it. Okay. I'll take the overview of it for now. Yeah.

No, but whenever we enter a new market, last year we entered Italy, we entered Croatia, so two new countries. Italy fairly big, Croatia fairly small. But still it's two very different markets. But we entered those two markets and this year we will enter new markets as well. I'm pretty confident on that. And I do believe sort of one of the first things you need to do when you're looking into a new market is to understand the market dynamics. Who are the players, who are the competitors doing that really thorough market, commercial due diligence. Do you think that is vital understanding who's winning, who's losing, et cetera, et cetera. With that it also comes pricing. You need to understand how is pricing, what has the recent transactions been in this country, these type of things that comes with that market. Understanding that you really need to be on top of. And then after doing so many deals, you have a good perception of what is a good deal and what's not a good deal. Whether it's in Italy, whether it's in Norway, whether it's in Argentina, you have a good feeling on is this worthwhile or not. That doesn't change.

You're pretty like extra cautious in terms of doubling down on your diligence effort commercially knowing the landscape and other players, who's winning, who's out there. And I feel like just because it is a new market, are you working with other resources, third parties, that maybe you wouldn't in a market you're already in?

Short answer is yes. I mean we can work with all the big commercial DD providers.

Would you be more inclined to do that? Like, hey, because you bought a company in Norway, I can imagine you running to hire a big four to do.

It versus we don't need consultants to tell us about the accounting software market in Norway. No, that's absolutely right.

But Italy, who would you hire in Italy just to make sure things don't go right?

Yeah, that could be one of the top firms, could be Bain, BCG, McKinsey, one of those. Or you could sort of go big four as well.

Higher uncertainty than that. Sort of where you would take a chance on a big name consulting firm to help alleviate that risk.

It's valuable to get that input and.

They know they rather than going blind. I agree.

You can do customer service, you can do expert interview calls, all these type of things. It does help you to get an improper understanding of the market. I do believe that's important. Instead of just jumping into it, how.

Do you get like the right localized expertise? You call your guy at Bain and saying, hey, I'm looking at this deal in Italy, like all right, I'll catch up my colleague over there and connect you.

Short answer is yes, I like your part of it. We also work with local brokers. If we don't have a local M and A person in that market, which we typically don't have when we actually don't have business there from before then. Yes, typically we also work with local buy side M and A advisors. They of course have a lot of knowledge around that market as well.

That would make sense. Get a banker there that would know the nuances of negotiation. If yeah, a bunch of things you got to negotiate after loi.

So one thing is the market knowledge, of course, but then as you say, the whole cultural aspect, language, negotiation, culture, et cetera, et cetera, it is important to be local again, M and A is local.

I'm trying to wrap my own head around this. I'm going back to my deal in Germany. I'M like I feel like this is exponentially more risky for me to do as an American company. That doing enough of these podcasts probably is a reason why I'm paranoid is that there's all these like Pandora box of problems I'm going to run into after doing this deal, especially like the execution and integration. How do I get comfortable doing that and how do I convince myself it's still a good deal despite I should just pay more attention to my backyard and look for things I don't necessarily.

Think teaming up with a local banker doesn't necessarily hurt in that context. You should also ask yourself how does this fit my equity story? Again, having that alignment, does this actually make sense for us or not?

Want to go big? Want to go global?

Yeah. And then what's your plan with the company tech? Is it rip and replace? Is it? So will you continue with the tech stack? All these questions. At the end of the day, if you plan to just migrate to customers then you should look at it as a customer acquisition cost. Is your plan to continue the business then can measure it on cash flow. All these things that you should take into account.

I like the idea of getting a local banker. Bankers can be good, may try to not be good depending on what side you're on or what side they're on. If I were to pick up a buy side banker in this new market for their expertise, I don't want to pay banker fees on the buy side because I feel like that's stupid not to knock any buy side bankers out there. I get it on the sell side because you're creating an auction and there's like a case around the value created. But the buy side can I find like an ex Corp dev person and saying hey, I'll put you on like an hourly engagement or something like that. I'm just curious of like absolutely.

You can do that as well with the buy side banker instead of a buy side banker.

Yes, the buy side banker is going to want fees.

He will have fees typically on a presenter deal size.

Yeah, I like how you're being very honest with me. I really appreciate that. What's the typical percentage range?

Oh it can vary but it also for us a buy side banker that's as much a door opener as anything else. And to have that cultural aspect and to know the market because once we have an loi then the visma m and a train takes over and then we run the deal in our own way. So getting up to an loi, that's where we see that they can actually be helpful.

Still a lot of fees to pay. Can you negotiate the fees?

Absolutely. Nothing is signed before it's signed.

Okay, so we negotiate the fees. Would that be a thing? Is find an ex corp dev person. I feel like they would be as good, if not better.

Oh yeah. And absolutely. And there are these platforms where you can find M and A talent.

If I were to start a business now, that's like an interesting opportunity is have I always think tech enabled right away. Cause I come from tech. But if you can bring in folks that had that deal expertise that don't have that mindset of the salesperson of I need a commission on every single thing. I don't know. There's something there.

Absolutely, fully agree.

Somebody listening wants to build on that. Let me know. I can't stop what I'm doing now. But glad to help out. So if we brought in the local expertise, we got comfortable doing that deal. It's probably the best thing. Any other big risk items of just like executing the deal and making it successful. That why I should or shouldn't do the deal?

In terms of risk?

Yeah. Because you're going in a first international deal or just branching out.

Germany. We're still talking about the German deal.

We're talking about the German deal. Yeah.

Okay. There are risks by default. There are tons of risks in M and A. You need to get comfortable. You're not able to diligence everything.

It's being blind to risk, but then being like exponentially more blind because it's.

In a whole different country, different culture.

That's what I'm trying to learn from you. You teach me that, I'll walk away.

Happy in different continents. When you've done 350 deals, you always have that. It's a balance. You need to understand the market, you need to understand the key DD topics on the other hand, analysis, paralysis. You need to know what's important and what's not important. You can talk yourself out of any deal. That's the easiest way to do it. Easy peasy. Then you don't do M and A. It's actually pretty easy. There is always some issues with all deals, even the slam dunk ones. There's always something that you can use as an argument not to do a deal. There is always risk. But I do think if you do a thorough dd, then you do it with open eyes, you know the risks and then you say, okay, this is actually still worth it.

That's a wrap to part one of this conversation with Syndra, head of M. And A at Bisma. Look for part two Coming soon.

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